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  • Commodity market report

    China coal short-term outlook August 2017: regulated domestic output and declining imports tighten market

    • 07 September 2017

    Tight supply supported prices, but updated 2+26 policy will further impact demand.

    $1,350.00

    Summary

    Entering August the record high temperatures felt in July gradually dropped leading us to reduce our estimation of thermal coal demand from 266 Mt in July to 254 Mt in August. Metallurgical coal demand was underpinned by persistently strong restocking by crude steel producers. We expect the robust demand will continue as steel mills maintain high output to take full advantage of current high margins. Although the government has allowed new supply to enter the market we are yet to see a material rise in output. Ongoing safety inspections and coal management tickets are mainly to blame. Mine accidents in Shanxi province in August further tightened domestic supply and bolstered both thermal and metallurgical coal prices. The Qinhuangdao 5500 FOB price remained high in August. It began at RMB 632/t and dropped slightly to RMB615/t by the end of the month. We expect the benchmark price will hover around RMB 625/t in September. On the metallurgical coal side we expect the benchmark Liulin#4 HCC FOR price will move up by RMB150/t from RMB1 400/t in August to RMB1 550/t in September. Also this month the Ministry of Environmental Protection updated the '2 26' policy. We expect it will impact 40 Mtpa of thermal coal and 25 Mtpa of coking coal demand. Key market data 2016 2017F 2018F Q1 Q2 Q3 Q4 Q1 Q2 Q3 F Q4 F Q1 F Q2 F Q3 F Q4 F Macro Economic Indicators China GDP 6.7% 6.7% 6.5% China IP 5.9% 6.1% 6.1% 6.0% 6.3% 6.0% 5.2% 5.0% 5.2% 5.0% 5.1% 5.2% Caixin PMI 49.7 48.6 50.1 51.9 51.2 Exchange rate (US$ vs. RMB) 6.64 6.88 6.95 Supply (Mt) China thermal coal production 660 700 730 788 666 750 780 795 700 750 750 770 China metallurgical coal production 162 174 169 168 159 170 177 166 159 172 181 171 Production (TWh/Mt) Coal fired generation (TWh) 953 928 1 065 1 064 1 045 998 1 111 1 060 974 894 1 019 1 020 Hydro power generation (TWh) 203 278 329 238 194 267 384 286 221 325 402 294 Total power generation (TWh) 1 356 1 399 1 604 1 524 1 458 1 492 1 726 1 584 1 499 1 525 1 747 1 657 Crude steel production (Mt) 192 209 205 202 201 218 215 208 201 218 215 208 Hot metal production (Mt) 190 207 203 200 199 211 206 199 194 211 208 201 Cement production (Mt) 444 656 656 641 442 670 654 652 432 644 643 630 Coke production (Mt) 103 113 116 117 107 114 119 112 105 114 120 114 Trade (Mt) Seaborne thermal imports (incl. Lignite) 33 40 52 55 42 43 38 47 37 32 39 43 Seaborne metallurgical imports 11 12 13 10 13 13 14 12 10 13 12 12 Landborne thermal imports (incl. Lignite) 1 1 1 2 3 4 3 3 4 4 4 4 Landborne coking imports (Clean) 2 4 4 6 4 5 5 4 5 5 5 5 Coke export (Mt) 3 2 3 3 2 2 2 2 2 2 3 3 Transportation (Mt) Rail (Mt) 476 434 465 520 490 570 550 550 550 540 561 585 Port (Mt) 155 158 160 170 180 150 155 163 170 155 155 163 Freight Rates (Voyage Routes) Panamax QLD > N China (US$/t) $5 $6 $8 9.5 9.9 10.8 Cape NEWC > S China (US$/t) $4 $6 $6 7.8 Panamax Indo > S China (US$/t) $3 $4 $4 4.7 4.8 4.7 Handysize QHD > S China (US$/t) $3 $4 $6 6.1 5.6 Key Stockpiles (Mt) Qinhuangdao Stocks 4.5 3.3 3.2 7.2 5.3 5.3 Guangzhou Stocks 1.6 1.6 2.3 1.7 1.4 1.5 Power plant Stocks (Days inventory) 18 18 17 16 14 21.0 Key Spot Prices (US$/t) Nominal Thermal FOB Newcastle @ 6 000 kcal NAR $50 $52 $67 $95 $82 $80 $93 $92 $89 $84 $81 $81 FOB Newcastle HA @ 5 500 kcal NAR $40 $43 $55 $73 $65 $67 $76 $75 $73 $69 $68 $68 FOB Indonesia EnviroCoal @ 5 000 kcal GAR $41 $41 $45 $63 $62 $59 $61 $62 $60 $57 $56 $56 FOB Indonesia EcoCoal @ 4 200 kcal GAR $31 $31 $34 $47 $45 $44 $45 $45 $43 $41 $40 $40 FOB Qinhuangdao @ 5500 kcal NAR $57 $59 $70 $95 $90 $88 $92 $94 $92 $85 $84 $84 Key Prices (US$/t) Nominal Metallurgical CFR Tangshan Liulin #4 $101 $110 $123 $208 $217 CFR Ganqimaodu Tavan Tolgoi HCC $59 $63 $74 $155 $162 $158 FOB Queensland HCC Benchmark $81 $84 $93 $200 $285 $194 $169 $183 $159 $149 $145 $136 FOB NSW Semi Soft $66 $71 $74 $130 $171 $126 $120 $128 $116 $110 $108 $105 FOB Queensland Ultra Low Vol PCI $69 $73 $75 $133 $180 $135 $123 $131 $119 $113 $111 $109 FOB US Hampton Roads Low Vol $83 $87 $95 $164 $234 $169 $150 $164 $157 $154 $150 $140 FOB US Hampton Roads High Vol A $83 $86 $94 $164 $237 $196 $159 $173 $157 $149 $148 $139 Source: Wood Mackenzie GTT sxcoal Indonesian Government NBS Argus Media inclusive of VAT

    What's included

    • Document

      cms china short term market report data.xls

      XLS 2.22 MB

    • Document

      China coal short-term outlook August 2017: regulated domestic output and declining imports tighten market

      PDF 394.82 KB

    • Document

      China coal short-term outlook August 2017: regulated domestic output and declining imports tighten market

      ZIP 1.78 MB

  • Commodity market report

    China coal short-term outlook September 2017: supply shortage overheats market

    • 10 October 2017

    A tight supply supported prices and shaky recovery in supply amid strong demand ensures that trend for thermal coal continues in Q4 2017.

    $1,350.00

    Summary

    In September thermal coal and metallurgical coal prices climbed 15% and 9% month on month respectively. The rises came despite the government pushing for speedier thermal coal production. Benchmark thermal coal prices broke RMB700/t in September as domestic supply continues to struggle from disruptions caused by safety inspections and demand appears strong amid earlier than expected winter restocking. Although the inspections will eventually wane given the need to ensure enough supply to meet winter heating demand we don t expect the supply tightness will ease by the end of 2017. As a result coal restocking for winter will ensure thermal coal prices remain strong in Q4. September saw metallurgical coal prices moving up further for most of the month and then showing signs of stabilising late in the month driven by supply tightness. Premium low volatile hard coking coal prices in September increased RMB130/t to RMB1 530/t on an FOR basis.We expect to see a substantial reduction in metallurgical coal demand in October when the '2 26' policy starts to play out putting downward pressure on metallurgical coal prices. Ongoing safety inspections to prevent any incidents while the Communist Party of China's 19th National Congress takes place in mid October have hindered domestic production. To address the issue the National Development and Reform Commission (NDRC) has urged mining companies against suspending production to avoid the scrutiny of rigorous safety inspections and to make sure adequate levels of production are met. The NDRC has also asked rail companies to prioritise coal transport to ensure power plants in key producing provinces have enough supply in preparation for the winter. Despite the increase in production we believe it may still be insufficient to balance the thermal coal market. We expect thermal coal prices will strengthen further to RMB720/t in October and RMB750/t in December. However metallurgical coal prices will fall to RMB1 500/t and RMB1 320/t in the same months. Key market data 2016 2017F 2018F Q1 Q2 Q3 Q4 Q1 Q2 Q3 F Q4 F Q1 F Q2 F Q3 F Q4 F Macro Economic Indicators China GDP 6.7% 6.7% 6.5% China IP 5.9% 6.1% 6.1% 6.0% 6.3% 6.0% 5.2% 5.0% 5.2% 5.0% 5.1% 5.2% Caixin PMI 49.7 48.6 50.1 51.9 51.2 Exchange rate (US$ vs. RMB) 6.64 6.88 6.95 Supply (Mt) China thermal coal production 660 700 730 788 665 760 775 810 670 743 750 750 China metallurgical coal production 162 174 169 168 159 170 179 172 159 172 182 174 Production (TWh/Mt) Coal fired generation (TWh) 953 928 1 065 1 064 1 045 998 1 103 1 040 987 924 1 045 1 047 Hydro power generation (TWh) 203 278 329 238 194 267 362 286 210 315 395 282 Total power generation (TWh) 1 356 1 399 1 604 1 524 1 458 1 492 1 726 1 584 1 512 1 542 1 757 1 675 Crude steel production (Mt) 192 209 205 202 201 218 215 209 201 218 215 209 Hot metal production (Mt) 190 207 203 200 199 211 206 199 194 211 208 201 Cement production (Mt) 444 656 656 641 442 670 654 595 425 657 657 575 Coke production (Mt) 103 113 116 117 107 114 119 115 105 114 121 115 Trade (Mt) Seaborne thermal imports (incl. Lignite) 33 40 52 55 42 43 46 50 41 40 42 47 Seaborne metallurgical imports 11 12 13 10 13 13 14 12 11 13 12 11 Landborne thermal imports (incl. Lignite) 1 1 1 2 3 4 3 3 4 4 4 4 Landborne coking imports (Clean) 2 4 4 6 4 5 5 4 5 5 5 5 Coke export (Mt) 3 2 3 3 2 2 2 2 2 2 3 3 Transportation (Mt) Rail (Mt) 476 434 465 520 490 570 550 550 550 540 561 585 Port (Mt) 155 158 160 170 180 150 155 163 170 155 155 163 Freight Rates (Voyage Routes) Panamax QLD > N China (US$/t) $5 $6 $8 9.5 9.9 10.8 Cape NEWC > S China (US$/t) $4 $6 $6 7.8 Panamax Indo > S China (US$/t) $3 $4 $4 4.7 4.8 4.7 Handysize QHD > S China (US$/t) $3 $4 $6 6.1 5.6 5.5 Key Stockpiles (Mt) Qinhuangdao Stocks 4.5 3.3 3.2 7.2 5.3 5.3 Guangzhou Stocks 1.6 1.6 2.3 1.7 1.4 1.5 Power plant Stocks (Days inventory) 18 18 17 16 14 21.0 Key Spot Prices (US$/t) Nominal Thermal FOB Newcastle @ 6 000 kcal NAR $50 $52 $67 $95 $82 $80 $95 $99 $100 $96 $88 $85 FOB Newcastle HA @ 5 500 kcal NAR $40 $43 $55 $73 $65 $67 $73 $78 $74 $71 $67 $65 FOB Indonesia EnviroCoal @ 5 000 kcal GAR $41 $41 $45 $63 $62 $59 $61 $62 $60 $57 $56 $56 FOB Indonesia EcoCoal @ 4 200 kcal GAR $31 $31 $34 $47 $62 $59 $63 $66 $67 $65 $60 $58 FOB Qinhuangdao @ 5500 kcal NAR $57 $59 $70 $95 $45 $44 $46 $47 $48 $46 $43 $42 Key Prices (US$/t) Nominal Metallurgical CFR Tangshan Liulin #4 $101 $110 $123 $208 $217 $195 CFR Ganqimaodu Tavan Tolgoi HCC $59 $63 $74 $155 $162 $158 FOB Queensland HCC Benchmark $81 $84 $93 $200 $285 $194 $170 $183 $159 $149 $145 $136 FOB NSW Semi Soft $66 $71 $74 $130 $171 $126 $120 $128 $116 $110 $108 $105 FOB Queensland Ultra Low Vol PCI $69 $73 $75 $133 $180 $135 $128 $131 $119 $113 $111 $109 FOB US Hampton Roads Low Vol $83 $87 $95 $164 $234 $169 $150 $164 $157 $154 $150 $140 FOB US Hampton Roads High Vol A $83 $86 $94 $164 $237 $196 $159 $173 $157 $149 $148 $139 Source: Wood Mackenzie GTT sxcoal Indonesian Government NBS Argus Media inclusive of VAT

    What's included

    • Document

      cms china short term market report data.xls

      XLS 2.23 MB

    • Document

      China coal short-term outlook September 2017: supply shortage overheats market

      PDF 390.72 KB

    • Document

      China coal short-term outlook September 2017: supply shortage overheats market

      ZIP 1.78 MB

  • Commodity market report

    Global metallurgical coal short-term outlook August 2017: Supply concerns prolong the bull run

    • 01 September 2017

    Premium HCC prices break the US$200/t barrier

    $1,350.00

    Summary

    This month prices for premium hard coking coals first hesitated but then pushed through the US$200/t barrier reaching almost US$210 by end August. Demand for imported metallurgical coal is still strong in China India much of the EU and Brazil. But key to this latest surge in prices was constraints on Chinese supply brought about by strict safety checks after a spate of fatal accidents in Shanxi. Luilin #4 prices have risen through the month and look poised to jump again incentivising China's buyers to look elsewhere for coal. Global hot metal production remains almost 4% above 2016 levels year to date. In China the threat of environmental restrictions during winter is causing steelmakers to front load production adding further impetus to the BOF steel sector that is already benefitting from the forced closure of scrap based plants. The elevated Chinese production and diversion of steel from export to domestic markets is underpinning the improved fortunes of the global steel sector. While the US Canada and Mozambique add coal tonnes into the market it is not happening fast enough to meet the uptick in demand. Despite the recovery of export rates in Australia attempts to add more tonnes have been hampered again this month by a range of temporary mine port and rail stoppages. Prices for all metallurgical coal types have responded in the second half of August. But looming on the horizon are restrictions to Chinese blast furnace and coke oven production part of the '2 26" pollution control policy set for implementation from as early as October. Coal demand should fall and the front loading of production for both coke and hot metal in the lead up to the policy could exacerbate the change in demand. Coal supply in China will remain under tight control until after the 19th Communist Party National Congress in mid October but should recover thereafter in time for demand to come under pressure. We expect prices to start falling at the back end of the year and continue through Q1 2018. But we now think the change will be more gradual and with BOF steel production keeping hold of its 2017 gains we think prices will average over US$145/t next year. Supply in China will be a major determinant of where prices ultimately lie. Risks around import restrictions are growing. Mongolia's exports to China are being capped and there are reports that southern Chinese ports are also being subject to import quotas. Such policies have the potential to greatly affect import demand and therefore seaborne prices and should be a key target of analysis over the coming weeks. Key market data 2016 F 2017 F 2018 F 2019 F Q1 Q2 Q3 Q4 F Q1 F Q2 F Q3 F Q4 F Q1 F Q2 F Q3 F Q4 F Q1 F Q2 F Q3 F Q4 F GDP Growth % (Y o Y) Global 2.3% 2.7% 2.6% 2.7% Brazil 3.6% 0.6% 1.6% 1.9% China 6.7% 6.6% 6.2% 5.9% Eurozone 1.7% 1.7% 1.1% 1.3% India 7.0% 6.9% 7.2% 6.8% Japan 1.0% 1.3% 0.9% 0.6% South Korea 2.8% 2.8% 2.2% 1.8% US 1.6% 1.3% 1.7% 2.0% 2.2% 2.4% 2.1% 2.1% 2.0% 2.3% 2.3% 2.7% 2.0% 2.3% 2.3% 2.7% Major Seaborne Exporters (Mt) Australia 45.2 48.6 47.4 47.7 43.8 38.7 47.9 49.0 44.4 46.9 46.5 49.7 43.1 45.8 45.3 48.2 US 8.1 7.7 6.6 8.5 10.7 11.2 9.4 9.7 9.1 9.7 10.1 9.4 9.5 8.7 7.4 6.7 Canada 7.0 6.3 6.7 6.2 5.7 6.9 7.1 8.0 6.9 7.3 7.6 7.1 6.4 6.2 6.4 6.3 Mozambique 0.9 1.1 1.2 1.5 1.6 1.8 2.0 2.2 1.8 2.6 2.6 2.6 1.8 2.6 2.6 2.6 Mongolia 2.2 4.1 4.4 5.8 4.5 4.5 4.5 4.0 4.7 5.1 4.7 4.6 4.5 4.5 4.5 4.5 Russia 6.0 6.5 6.2 6.0 6.3 7.4 7.0 7.0 5.8 6.9 6.8 6.5 7.3 8.2 8.0 7.7 Major Seaborne Importers (Mt) Japan 15.0 14.4 15.1 15.1 14.8 15.3 14.3 14.5 13.5 14.2 14.0 14.4 13.2 14.0 13.7 14.1 China seaborne 10.8 12.4 12.9 10.2 13.4 13.4 14.1 11.9 10.2 12.8 12.1 12.3 10.1 11.2 10.0 10.7 India 9.4 11.0 13.3 13.4 11.7 12.9 12.9 12.7 13.8 13.8 13.3 13.7 14.1 14.1 13.7 14.0 South Korea 8.9 9.2 9.6 9.8 8.9 9.2 9.4 8.4 8.9 9.4 8.5 8.3 8.8 9.2 8.4 8.2 Taiwan 2.1 2.6 2.4 2.5 2.5 2.5 2.5 2.5 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 Brazil 4.4 3.6 4.4 3.7 4.6 4.2 3.9 3.8 4.3 4.3 4.0 4.0 4.2 4.2 4.2 4.2 Germany 4.1 3.9 4.0 3.8 4.3 4.2 4.6 4.4 4.2 4.1 4.4 4.2 4.2 4.2 4.5 4.3 Freight Rates (Voyages US$/t) Panamax QLD > Japan $4.50 $5.38 $6.90 $8.53 $8.50 $8.58 Panamax QLD > E India $5.77 $6.85 $8.28 $9.87 $11.08 $11.20 Panamax US E Coast > Germany $5.20 $7.06 $7.08 $8.85 $8.71 $8.43 Key Prices (US$/t) Nominal Annual Averages Queensland HCC Benchmark $81 $84 $93 $200 $285 $194 $169 $183 $159 $149 $145 $136 $122 $122 $119 $122 NSW Semi Soft $66 $71 $74 $130 $171 $126 $120 $128 $116 $110 $108 $105 $97 $96 $94 $96 Queensland Ultra Low Vol PCI $69 $73 $75 $133 $180 $135 $123 $131 $119 $113 $111 $109 $100 $100 $98 $100 US Hampton Roads Low Vol $83 $87 $95 $164 $234 $169 $150 $164 $157 $154 $150 $140 $126 $125 $123 $125 US Hampton Roads High Vol A $83 $86 $94 $164 $237 $196 $159 $173 $157 $149 $148 $139 $126 $125 $123 $125 Key Prices (US$/t) Nominal Annual Averages Queensland HCC Benchmark $114 $208 $147 $121 NSW Semi Soft $85 $136 $110 $96 Queensland Ultra Low Vol PCI $87 $142 $113 $99 US Hampton Roads Low Vol $107 $179 $150 $125 US Hampton Roads High Vol A $107 $191 $148 $125 Source: Wood Mackenzie Customs Data AXS Marine sxcoal IMF Various Pricing Surveys Mongolian exports are all landborne and are displayed on a clean/washed basis starting Q2 2017 benchmark is a 3 month trailing average spot price

    What's included

    • Document

      Global metallurgical coal short-term outlook August 2017: Supply concerns prolong the bull run

      PDF 332.29 KB

    • Document

      cms metallurgical trade short term outlook August 2017.xls

      XLS 2.16 MB

    • Document

      Global metallurgical coal short-term outlook August 2017: Supply concerns prolong the bull run

      ZIP 1.60 MB

  • Insight

    Administration backs away from direct coal assistance

    • 29 August 2017

    In recent days, the Trump administration has declined the opportunity to use executive powers to directly support the coal industry.

    $1,100.00

    Summary

    What's included

    • Document

      Administration backs away from direct coal assistance

      PDF 253.76 KB